Indigenization of the defence sector is one of the foremost targets for Indian government since Independence. Recently, Asia’s biggest Aero Show AeroIndia 2021 was conducted in Bengaluru. During the show, Defence Minister highlighted India’s growing presence in designing and developing indigenous weapon systems. Let’s see, how India is performing in indigenisation of defence despite the challenges.
Present status of Indigenisation in India:
- Millennium Aero Dynamics and Cochin Shipyard jointly developed and produced the INS Vikrant. It is the first aircraft carrier built in India completely.
- BARC and DRDO jointly developed India’s first indigenous nuclear submarine Arihant.
- HAL along with Taneja Aerospace and Aviation Limited (TAAL) is developing Dhruv multirole helicopter, Light Combat Helicopter (LCH) and Rudra armed helicopter. They are also manufacturing Tejas Light Combat Aircraft in India.
- DRDO is currently working on an indigenous unmanned aerial vehicle named Nishant.
- Under the Integrated Guided Missile Development Programme (IGMDP), India developed 5 missiles in India namely
- Akash (surface-to-air)
- Prithvi (surface-to-surface)
- Nag (anti-tank)
- Trishul (the naval version of Prithvi)
- Agni Ballistic missiles having different ranges – Agni V has given India an ICBM (Intercontinental ballistic missile) status in 2013.
Need for indigenous defence sector:
First, reducing India’s Fiscal Deficit: Currently, India’s defence sector imports stand at 70%. This makes India the 2nd largest arms importer in the world, only next to Saudi Arabia. According to the Stockholm International Peace Research Institute (SIPRI), in 2019, India became the third-largest defence spender in the world. So, indigenisation of the defence sector is necessary to reduce the Fiscal Deficit.
Second, national security at risk: India shares porous borders with hostile neighbours. Currently, imported equipment in India are creating multiple challenges related to their Maintenance, Repair & Overhaul (MRO) due to non-availability of spares and assemblies. These equipment without proper MRO can put India under major risks mainly during the war like situation. For example, recent military standoff with China. This will put India’s national security at risk. So indigenisation is necessary.
Third, generation of employment: Defence manufacturing is one of the very few sectors that will lead to multiplicity of employment benefits. As per the government estimates, just 20-25% import reduction will directly create 100,000 to 120,000 additional highly skilled jobs in India. Apart from that, it will lead to large scale innovation, a huge number of spin-off industries and start-ups etc.
Fourth, boosting Indian exports and generating forex reserve. The SIPRI data mentions India as the 23rd largest country in terms of defence exports. This shows under-performance considering the fact that, India spent $71.1 billion in the defence sector in 2019 alone. India can export indigenously produced defence technology and equipment to the neighbouring nations. Like space and nuclear research, R&D in defence sector will increase the focus on both civil and military economy.
Fifth, indigenous equipment will increase the trust and confidence of the Indian defence forces. It will also strengthen India’s image in the global arena.
Government initiatives to boost indigenisation in defence sector:
First, India introduced the Defence Procurement Policy to focus on self-reliance. The policy allowed the (DAC) Defence Acquisition Council to “fast-track” ways to acquire weapons. The policy aims 2025 to be the year to become self-reliant in 13 weapons platforms. These include missiles, warships, tanks, aircraft, and artillery. These comprise the bulk of Indian imports.
Second, the establishment of E-Biz Portal. It is an online portal to process applications for Industrial Licences (IL). The Government also set up Innovations for Defence Excellence (iDEX) framework. It aims to create an ecosystem to foster innovation and technology development in Defence and Aerospace.
Third, removal of annual capacity restriction criteria for defence industries. This is to facilitate more number of startups in the defence sector.
Fourth, the government also approved the Strategic Partnership Policy. This is to promote Joint Ventures (JV) between global defence majors and the indigenous private sector. Under this, the government will designate certain private players a status of Strategic Partner (SP). That SP will have long term relationships with global defence majors to learn the technology and also to build the capacity at the local level.
Fifth, the change in FDI policy. The government earlier allowed 49% of FDI under the automatic route. But in 2020 the government increased this to 74%. This will act as a major boost to the defence sector as it will not only increase FDI but it will also increase the number of startups.
Sixth, recently the government imposed a ban on 101 import items in the defence sector to boost indigenisation. These include high tech weapons like artillery guns, sonar systems, assault rifles, radars, transport aircraft, etc. As a result of this, now the defence forces will procure these equipment only from the domestic manufacturers.
Challenges in indigenisation of defence sector:
First, private sector participation is very low. Currently, India depends on DRDO and defence PSUs for the majority of its needs. There is an issue of land acquisition in India. This, coupled with non-availability of Permanent arbitration committee to settle disputes in India leads to lower private participation.
Second, manufacturing and procurement-related delay. There are bureaucratic and political hurdles in India. Indian defence suppliers also take more time to complete the projects. There is also a problem of delay in the delivery of the projects. This hurts India’s image as a trusted supplier.
Third, conflict between the manufacturers & defence forces. Defence forces being on the ground of the battlefield, know that the border areas demand some specific design and characteristics of the equipment. But there is a conflict between the manufacturers and defence forces in India regarding the design, capacity etc of the defence equipment. All this leads to inefficient coordination between the military, academy and industry.
Fourth, most of the Indian defence budget goes towards salaries, retirement benefits, perks and benefits, MRO of equipment etc. This limits the government capacity to focus on long-term budgeting towards the defence sector.
Suggestions to improve indigenisation:
First, the government can implement the Shaketkar committee recommendations on the closure of Army Postal Establishments and Military Farms in peace locations swiftly. Apart from that government can also consider the Chief of Defence Staff opinion. He mentioned increasing the retirement age to improve government spending on other relevant activities.
Second, boosting private sector participation is the need of the hour. This can be achieved by creating a permanent arbitration cell, ensuring level playing field for private companies like that of PSUs.
Third, the government can provide an autonomous status to DRDO. It will improve the number of sub-contracts to the private sector and also instil the confidence to private sectors.
Fourth, the government have to improve the in-house design capacity like that of Naval Design Bureau. This will reduce the conflict with manufacturers in design and capacity. Shaketkar committee recommended transformation of ‘The Military Intelligence School’ at Pune into ‘tri-service intelligence training establishment’.
According to SIPRI, India’s military expenditure in 2019 was 2.4% of its GDP. It was higher than the combined expenditure on health(1.5%GDP) and research (0.7% of GDP). The government needs to improve the indigenization in defence sector at the war pace as it has many benefits such as reducing Fiscal Deficit, improvement in manufacturing etc.